UNITED STATES E-COMMERCE GUIDE TO THE - THE CANADIAN TRADE COMMISSIONER SERVICE
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Everywhere you export The Canadian Trade Commissioner Service tradecommissioner.gc.ca E-COMMERCE guide to the United States
Selling via e-commerce in the United States
A custom report compiled by Euromonitor International for the
Canadian Trade Commissioner Service
www.euromonitor.com
© Euromonitor International Ltd 2018 All rights reserved. The material contained in this document is the exclusive property of Euromonitor International Ltd and its
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E-commerce Guide to the United States | 2
List of Contents and Tables
chapter #1 MARKET HIGHLIGHTS 4
chapter #2 THE LIFECYCLE OF AN E-COMMERCE BUSINESS 6
chapter #3 WHY THE U.S. MARKET? 8
chapter #4 ENTERING THE U.S. MARKET 15
chapter #5 UNDERSTANDING THE U.S. MARKET 29
chapter #6 ONGOING CONCERNS 40
chapter #7 RELEVANT E-COMMERCE SERVICE PROVIDERS AND PARTNERS 46
chapter #8 E-COMMERCE CHECKLIST 51
chapter #9 HELPFUL E-COMMERCE DEFINITIONS 53
chapter #10 TRADE COMMISSIONER SERVICE (TCS) RESOURCES 55
E-commerce Guide to the United States | 3
chapter #1 Market highlights Return to Table of Contents E-commerce Guide to the United States | 4
Market highlights
The role of e-commerce in the global retail landscape cannot be understated. Global Internet retail sales in the U.S.
brick-and-mortar retail sales experienced a decline between 2012 and 2017, while are expected to grow at a
compound annual growth rate
e-commerce more than doubled to reach over US$1.3 trillion in 2017. (CAGR) of 14.8% per year from
2017 to 2022.
The United States is a key driver behind the rise of global Third-party marketplaces, social networks, and partners
e-commerce, with total e-commerce sales in the U.S. throughout the Internet retailing ecosystem help both
exceeding US$360 billion in 2017, second only to China. large and small companies to enter the market with
E-commerce sales in the United States exceed Canada’s varying levels of commitment.
retailing sales in all channels combined. Despite the size
of the U.S. market, there is still room for significant growth: The purpose of this report is to help identify how
Internet retail sales in the country are expected to nearly Canadian businesses can take advantage of the U.S.
double from 2017 to 2022. e-commerce market. The report will explain the country’s
e-commerce industry and its drivers as well as analyse
The size of the market, ease of entry, and close proximity opportunities, challenges, and resources for success.
to Canada make the United States an appealing target for
a Canadian business that is looking to expand.
Return to Table of Contents E-commerce Guide to the United States | 5
chapter #2 The lifecycle of an e-commerce business Return to Table of Contents E-commerce Guide to the United States | 6
The lifecycle of an e-commerce business
If your company is interested in selling in the e-commerce market in the U.S., you
likely have a product lined up or already being sold via retail or digital channels in
Canada and now need to understand how to expose the product to audiences in
the United States.
Even if your product fits a consumer need or is “best in The third step is actually marketing and selling your
class”, it will still take a significant amount of effort to product to consumers. Understanding how to get
succeed in e-commerce channels in the country. There consumers’ eyes on your products and convert them into
are four general steps involved with entering this market. customers is particularly challenging today, when
consumers are overwhelmed with choices. Developing a
The first step is to decide whether to enter the market to strong marketing plan is often an overlooked aspect of
begin with. This phase involves researching your product launching your business in a new market but is in fact one
and competitors, identifying and analysing your target of most important tasks.
audience, and deciding how to reach that audience. You
may have already conducted some of this research or Finally, as your business grows and sells higher volumes,
even be an expert in your chosen industry. However, there may be new challenges and opportunities that arise.
it is still important to conduct systematic market analysis Understanding how to take advantage of and manage
specifically for the U.S. in order to decide whether to these scaling issues should be an ongoing concern.
enter the market and develop a market entry Business and e-commerce are changing at a faster and
plan accordingly. faster pace: You should monitor these changes and revisit
your strategies regularly to ensure they continue to
The second step involved in entering the U.S. position your company for success.
e-commerce market is getting your products in a position
to be sold. This phase includes building your inventory This guide will address the entire cycle outlined above.
and understanding how to store it, cataloguing items on Its goal is to help you understand how to position your
your website or on the Internet marketplace(s) you will business for success in the U.S. e-commerce market
be using, arranging for payments to be processed, and should you choose to pursue it.
building systems through which to fulfil orders and ship
products. Particularly for the U.S. market, you should also
ensure you have a reliable returns process.
Return to Table of Contents E-commerce Guide to the United States | 7
chapter #3
Why the u.s. market?
3.1 The United States has a strong
economy and well-developed
technology landscape
3.2 The United States has a large and
unified market
3.3 The United States has a
diverse population
3.4 E-commerce in the United States
is expected to continue growing
Return to Table of Contents E-commerce Guide to the United States | 8
3.1
The United States has a strong economy and
well-developed technology landscape
The United States is a well-developed market for Internet-oriented businesses.
The country has strong economic fundamentals and a generally healthy consumer
economy. The U.S. has also been an early and sustained leader in the creation and
adoption of technology.
The United States has one of the world’s strongest The integration of Internet-enabled technology into
economies, with the largest gross domestic product consumers’ lives is only expected to continue as the
(GDP) at US$19.4 trillion in 2017. The U.S. is the largest population increasingly relies on the Internet to access
consumer market in the world and the second largest information, make decisions, and, complete daily tasks.
e-commerce market. The country also has the highest Mobile devices (smartphones and tablets) have
levels of disposable income (US$14.8 trillion) and become especially important facilitators of this
consumer expenditure (US$13.1 trillion) across OECD integration process.
countries. Furthermore, the U.S. population is increasing
and disposable income per capita is expected to grow, Annual per capita disposable income (US$)
suggesting that the United States will generally remain an
56 000
attractive market in the coming years.
54 000
The United States has excellent conditions for 52 000
e-commerce growth in particular. The U.S. population is 50 000
highly technology oriented: As of 2017 nearly three out of
48 000
four U.S. consumers use the Internet daily as part of their
personal or professional life. Many savvy companies and 46 000
brands use this digital immersion as to build a reputation 44 000
among consumers and create selling opportunities. 42 000
40 000
2017 2018 2019 2020 2021 2022
Return to Table of Contents E-commerce Guide to the United States | 9
Household possession of smartphone (%)
Number of Americans using Internet daily (%)
90
75
80
70
70
65
60
60
50
55
40
50
2012 2013 2014 2015 2016 2017 30
2012 2013 2014 2015 2016 2017
Internet technology has transformed the U.S. retailing savings are partly because e-commerce does not require
industry as well as the shopping behaviour of U.S. new products to navigate through the
consumers. Approximately 80% of U.S. consumers shop bureaucratic sales processes that are common among
online, and 15% of consumers in the U.S. make purchases brick-and-mortar retailers. In addition, the targeted
on a weekly basis.1 Internet retailing has become a marketing that is possible online can make it easier to
mainstay: The majority of U.S. consumers consider connect directly with your audience while keeping costs
multiple channels when making a purchase, and some low and avoiding middlemen. Companies that would
consumers visit online stores first.2 These numbers do have mass marketed a product in the past can now tailor
not show signs of slowing down, as e-commerce offers campaigns to niche audiences, allowing more unique and
consumers benefits such as convenience and a greater custom products to come to market.
variety of products and price points.
The combination of shifting consumer habits and an
Economic prosperity and technology adoption create an enabling business environment has created room for
excellent opportunity for businesses to start or expand. fast-growing disruptors as well as niche brands that may
In the United States, e-commerce enables companies and not have otherwise survived. Understanding what is
brands to come to market significantly faster and with driving consumers and what tools are available for
lower cost than would have been the case when bringing success is key to a winning e-commerce strategy in the
a product to retail a decade ago. These time and cost United States.
1
Pew Research Center, “Online Shopping and E-Commerce,” December 19, 2016.
http://www.pewinternet.org/2016/12/19/online-shopping-and-purchasing-preferences
2
Oracle, “4 Cross Channel Marketing Stats Marketers Need To Know Going Into 2017,” December 19, 2016.
blogs.oracle.com/marketingcloud/4-cross-channel-marketing-stats-marketers-need-to-know-going-into-2017
Return to Table of Contents E-commerce Guide to the United States | 103.2
The United States has a large and unified market
One of the main advantages a Canadian business gains by selling into the U.S.
is access to a large single market. After a Canadian company crosses the border into
the United States, there is little in terms of additional regulation that it needs to
address in order to ship items to any of the 50 states, giving the company access to
over 320 million consumers.
Although there is little in terms of regulation companies implications will vary by state and should be investigated
may have to pay a state-level tax depending on their further. Many online marketplaces offer tools to help
relation to the state in question. Companies only have to calculate the sales tax due on a given purchase, but it is
pay a state sales tax when the company has a up to the seller to actually remit the tax payment to each
physical “nexus” with the state to which a good is shipped. individual state as needed.
A nexus can include a company’s storefront, warehouse,
sales team, or other physical connection with the state, In terms of physical infrastructure, the United States
even if that physical connection was not involved with offers a large and robust logistics system that keeps the
the specific sale in question. Unfortunately, warehousing entire country within reach. Depending on the size of the
with third-party logistics and fulfilment companies in the package, it can often be cheaper to send an item across
United States still constitutes a physical nexus. the continental United States than it is to send an item
across a city in Canada. Logistics options are available for
The physical nexus can be avoided entirely if a company businesses of any size, from the small and medium-sized
keeps its operations within Canada and ships goods businesses (SMBs) that pack and ship out of personal
cross-border directly to the consumer. For companies homes to large-scale companies that contract third-party
with a physical nexus in the United States, the tax logistics (3PL) partners such as FedEx, UPS, or DHL.
Return to Table of Contents E-commerce Guide to the United States | 113.3
The United States has a diverse population
Even though the logistics of selling products across the United States are relatively
straightforward, companies should still conduct research to understand where there
is demand.
If your company is selling to a niche audience, then you “baby boomer” generation as the largest in the “Selling online in the
should try to understand where that audience is located United States. The millennial generation has embraced
and what the best way to reach it is, including whether e-commerce, with 40% of millennials shopping online at US is 70% research,
your marketing should be purely online or incorporate least once per week. However, the baby boomer 20% planning, 10%
offline channels as well. Keying into the correct generation still controls about 70% of the nation’s execution.”
demographics and targeting them is a critical component disposable income and less than 17% of baby boomers
of building a successful e-commerce business in the shop online at least once per week.3 These numbers – CEO of an e-commerce
United States. suggest that online shoppers are more likely to be consulting firm
frequent buyers with lower spending power.
There are three key demographic factors that companies
should consider: age, income, and urbanisation. These Income
should be the beginning and not the end of your Top cities for online shopping:
research; they are starting points that apply to the Income also affects the likelihood that consumers will
shop online, how often they do so, and how much 1. New York, NY
United States and e-commerce in general.
they spend. Only 20% of low-income earners (under 2. Houston, TX
Age US$30,000 per year) “do a lot or fair amount” of shopping 3. Chicago, IL
online, down from 24% in 2012. This is in stark contrast to 4. Los Angeles, CA
Consumers’ age is an important consideration because the 62% of high-income earners (over US$100,000 per
the appeal of technology and e-commerce may vary 5. Austin, TX
year) who “do a lot or fair amount” of shopping online, up
across age groups and because age is related to spending from 45% in 2012.4 6. Miami, FL
power. In 2016 the “millennial” generation eclipsed the 7. San Diego, CA
8. San Francisco, CA
9. Las Vegas, NV
3
Morgan Stanley, “Generations Change How Spending is Trending.” August 26, 2016.
https://www.morganstanley.com/ideas/millennial-boomer-spending 10. Dallas, TX
4
CNBC, “There’s a wide – and growing – digital divide between high- and low-income shoppers,” December 19, 2017. Source: Micro D
https://www.cnbc.com/2017/12/19/theres-wide-digital-divide-between-high-and-low-income-shoppers.html
Return to Table of Contents E-commerce Guide to the United States | 12Urbanisation
When online spending is analysed by state and city in the United States, it roughly corresponds
with population size. Thus, a typical consumer’s state or city does not seem to significantly
impact how much they spend online. However, the degree of urbanisation does seem to affect
online spending levels. According to e-commerce company MicroD, metropolitan consumers
spend approximately US$853 online per year compared to US$768 for suburban shoppers and
US$684 for rural shoppers.5 Part of this may be attributed to higher income levels in
metropolitan areas, but the difference may also be a result of the ease of access of traditional
retail outlets in suburban and rural areas.
The overview of demographic factors above suggests that young, urban, and wealthy consumers
are generally the best target audience for online sales. However, companies should still seek to
identify the audience that is the best fit for their brand and product.
3.4
E-commerce in the United States is expected to
continue growing
The U.S. e-commerce market is also attractive because it
Internet retailing sales in the U.S. (US$ Billions)
is expected to keep growing. Internet retail sales
experienced the highest growth rate among retailing 400
channels between 2016 and 2017. This was largely driven 350
by the prices, convenience, and large inventory offered 300
by online channels, but growth was also boosted by the
250
push that traditional retailers made to expand their online
footprint. The U.S. e-commerce market grew at a CAGR 200
of 13% between 2013 and 2017, and this pace is expected 150
to continue in the future. 100
50
0
5
MicroD, “The Top 10 Cities for Online Shopping.” 2013 2014 2015 2016 2017
https://www.microdinc.com/2017/06/28/top-10-popular-cities-online-
shopping/
Return to Table of Contents E-commerce Guide to the United States | 13Internet retailing by category (2017, US$ Millions)
Other 114 597
Apparel and footwear 69 710
Consumer electronics 43 199
Media products 40 100
Market analysis: Key takeaways
Personal accessories and eyewear 23 349
Homewares and home furnishings 22 134 • Is there demand for your
product in the United States?
Food and drink 12 695
Consumer appliances 9 008 • What does your target
demographic look like?
Beauty and personal care 8 005
Consumer health 7 527 • Is this population accessible
Home improvement and gardening 5 646 via online channels?
Traditional toys and games 5 154
Pet care 2 848
Video games hardware 1 378
Home care 669
0 50 000 100 000 150 000
Return to Table of Contents E-commerce Guide to the United States | 14chapter #4
Entering the u.s. market
4.1 Choosing an online channel
4.1.1 Channel profile: Amazon Marketplace
4.1.2 Channel profile: eBay
4.1.3 Channel profile: Walmart Marketplace
4.1.4 Channel profile: Jet.com
4.1.5 Channel profile: Rakuten
4.1.6 Channel profile: Independent websites
4.2 Preparing for business
4.2.1 Website and technology
4.2.2 Payment
4.2.3 Legal concerns
4.2.4 Supply chain options
4.2.5 Customs processes
4.2.6 Returns
Return to Table of Contents E-commerce Guide to the United States | 154.1
Choosing an online channel
Besides deciding whether to sell online in the United States to begin with, it is also
important to analyse the three channels you can use to sell online in this market:
selling on a retailer’s website, leveraging a retailer’s “marketplace” platform, or selling
on your own website.
You can select one or a combination of these options Adding your product to a retailer’s inventory
for your product(s). Being represented on a marketplace
is critical as approximately 67% of consumers’ product The first option is to distribute your product through an
searches originate within a retailer or marketplace app e-retailer’s website, which is similar to going through a
or website compared to only 15% originating on a search traditional retail company: You need to apply to become
engine.6 Meanwhile, maintaining an individual website is one of the retailer’s vendors and obtain approval before
critical especially for unique products or niche categories the retailer will list your product on its physical or digital
so that you can control what consumers find when they shelves. Examples of retailers that operate this way are
do seek your product online. Macy’s and Best Buy. Some retailers have more lenient
approval processes for their websites than
brick-and-mortar counterparts, but these are still more
6
UPS, “2017 Pulse of the Online Shopper, Volume 1,” 2017. burdensome than the processes involved in selling on
https://solutions.ups.com/ups-pulse-of-the-online-shopper-lp.html online marketplaces.
Return to Table of Contents E-commerce Guide to the United States | 16Selling on an online marketplace largest example of this kind in the United States. The
retailers can also be “pure play” e-retailers (i.e., retailers
The second option is to sell your product on one or that are purely or almost entirely focused on online sales)
more online marketplaces, also referred to as “third-party that offer a marketplace as a portion of their service.
merchant marketplaces”. Online marketplaces are portals Amazon is the best example in the United States of an
where companies can create profiles and sell their e-retailer with its own product inventory as well as a
products as suppliers within a broader marketplace. marketplace platform. The second category of
Online marketplaces accounted for 34% of Internet retail marketplace is where the marketplace represents the
sales in the United States in 2017. operator’s entire service, such as with eBay, which only
sells marketplace items.
Selling through a marketplace has advantages and
disadvantages. The companies running online Creating your own online sales portal
marketplaces try to make it easy for companies to list
themselves as sellers on their platforms and run online The third and final channel for selling goods online is to
stores there. They compete against each other by offering create your own website and sales portal. Although
potential sellers a smooth application process as well as creating and running your own online store takes time
services to help them sell successfully on the marketplace and money, it is significantly easier than it was just a few
once they are approved (e.g., systems to track orders years ago. There are service providers that have
and shipping, webinars to learn how to position products streamlined or automated many of the website creation
online). On a marketplace, you will have more control and logistics tasks required. Companies like Wix,
over the pricing and placement of your product than you WordPress, and Squarespace make it easy to create a
would when applying to add your product to a retailer’s website; Square, Stripe, and PayPal can handle payment
own inventory. However, even with the services many issues; and others like Shopify handle multiple
marketplaces offer their sellers, you will also typically e-commerce business functions.
receive less support from a marketplace operator than
from a more traditional retailer. On a marketplace, you The main benefits of selling through your own website is
are largely responsible for your own inventory tracking, that you have complete control over your brand and an
marketing, etc., even if the marketplace’s platform helps exclusive place to showcase and promote your products.
you do this. If you work with a retailer, the retailer takes You also save money by avoiding the posting fees
on many of these responsibilities because your products charged by marketplaces or the cut of the profits that
become part of its own inventory. retailers take. The main disadvantages are that you are
responsible for the entire business and that your
There are two categories of marketplaces in the United products are not included in a retailer or marketplace’s
States. Some marketplaces are operated by retailers that product discovery tools. It may also turn out to be more
also sell their own inventory. These retailers can be expensive to operate your own online store than to pay
historically brick-and-mortar retailers that have marketplace fees to sharing profits with a retailer,
incorporated online channels, with Walmart being the particularly if the marketplace or retailer increases your
sales by more than you can alone.
Return to Table of Contents E-commerce Guide to the United States | 17Maintaining an independent website is critical even if you 4.1.1
decide not to include a sales portal. Having your own Channel profile: Amazon Marketplace
website helps you control what consumers find when
they search for your product online, which is especially Since it was founded in 1994 in the United States, Amazon
important for unique products or niche categories. You has grown to be synonymous with e-commerce in the
should also maintain a strong web presence so that you country (and, indeed, in some other parts of the world as
can link to it from social media and track what resonates well). In 2017, Amazon’s total U.S. retail sales were
with consumers online. US$168 billion, with marketplace sales by third-party
merchants accounting for US$111 billion (or 66%).
Combining online channels
This profile focuses on Amazon’s marketplace platform,
You are not limited to choosing a single online sales but there are two ways to sell a product via Amazon.
channel. Unless a retailer signs an exclusive The first is to become one of Amazon’s vendors, which
merchandising deal with you, then you can sell via an is similar to selling via a major brick-and-mortar (i.e., “big
online marketplace and/or your own website even if your box”) retailer. The second option is to sell as a third-party
products have been added to a retailer’s inventory. merchant on the Amazon Marketplace, which launched in
Similarly, sellers often post their products on multiple 2000. Third-party merchants’ products are displayed on
marketplaces to reach as many consumers as possible. Amazon.com along with products sold by Amazon itself
In fact, some of these services and platforms actively (Amazon’s own inventory); however, selling on the
help you integrate different sales channels. Examples of marketplace involves less commitment from the merchant
service integration include Shopify, which can work as the to Amazon and less support from Amazon to
inventory and fulfilment backend for Amazon and eBay; the merchant.
and Fulfilment by Amazon (FBA), which can be used to
fulfil orders from other websites with Amazon’s To join the Amazon Marketplace, a company needs to “Our goal with
Multi-Channel Fulfilment service. commit to either a Professional or an Individual selling
plan. The Professional plan costs US$39.99 per month for
Amazon Prime, make
an unlimited number of items, while the Individual plan no mistake, is to make
U.S. Internet retailing brand shares (2017, %)
30
costs US$0.99 per item sold. Merchants also need to sure that if you are
decide whether to use Fulfilment by Amazon (FBA),
25 which is a paid service where Amazon takes on the not a Prime member,
20 responsibility storing, picking, packing and you are being
shipping inventory.
15 irresponsible.”
10
– Jeff Bezos, CEO, Amazon
5
0
3rd party Amazon 3rd party Apple.com Walmart Macy’s
merchants merchants
- Amazon - Ebay
Return to Table of Contents E-commerce Guide to the United States | 18Merchants on either plan are also charged a or online. The company also boasts a strong membership
percentage-based “referral fee” per item, and if the item is program called Amazon Prime, which incentivizes buyers
a media product there is also a percentage-based with free two-day shipping and other benefits.
“variable closing fee”. When an item is purchased via
the marketplace, Amazon collects the payment from the Challenges
buyer and withholds the fees owed to Amazon. If the
If you decide to sell on the Amazon Marketplace, you
merchant uses FBA, then Amazon withholds shipping
will need to pay fees as well as compete with over 120
charges as well. If the seller has opted to handle delivery
million other products and the more than 100,000 new
themselves, then the buyer’s shipping payment is passed
sellers joining the marketplace each month. Posting on
through to the seller (sellers must preestablish what the
Amazon also means you have no control over what other
shipping fee will be for every product they sell on the
advertised or suggested products might be displayed to
Amazon Marketplace).
consumers as they review your product page. Amazon
Opportunities itself may even compete against you with its dozens of
private label brands.
Amazon offers optional fulfilment services to make the
entire logistics and inventory process as seamless as 4.1.2
possible for merchants on its marketplace. To take Channel profile: eBay
advantage of FBA, the merchant needs to ship their items
to an Amazon Fulfilment Centre, where Amazon will eBay launched in 1995 as a U.S.-based online marketplace
warehouse the items until they are sold. Amazon charges for goods. Unlike Amazon, the company has focused on
shipping fees on each item that uses FBA (as described the marketplace model since inception, selling products
7
Statista, “Monthly unique visitors to U.S.
retail websites 2017,” 2018. above), and there are additional fees depending on how through both fixed-price and auction processes. eBay
https://www.statista.com/statistics/271450/ long an item is warehoused. FBA has the added benefit originally gained traction as a destination for used items
monthly-unique-visitors-to-us-retail-web- but has grown into a marketplace for new and used
sites/ of handling in-country customer service as well as returns,
which would eliminate the complexity of returning items items and is often a destination for hard to find and
8
Statista, “Monthly unique visitors to U.S. unique products.
retail websites 2017,” 2018. across the border to Canada.
https://www.statista.com/statistics/271450/
monthly-unique-visitors-to-us-retail-web- Selling on the Amazon Marketplace gives you access eBay has over 113 million U.S. visitors per month8 and a
sites/ total of over 164 million “Active Buyers”,9 making it a major
to over 197 million U.S. visitors per month;7 it is the top
9
eBay Inc., “Q2 2016 Company Fast Facts,” destination for online retailing in the United States. Many destination for online shoppers. eBay brought in nearly
https://static.ebayinc.com/static/ US$27 billion in U.S. sales in 2017, up from less than
assets/Uploads/PressRoom/eBay- consumers in the U.S. will look at Amazon before
Q22016FactSheet-Investor-Site.pdf considering another retailer, whether brick-and-mortar US$16 billion in 2012.
Return to Table of Contents E-commerce Guide to the United States | 19Whether a product is sold through an auction or at a individual storefronts, which gives them a more
fixed price, eBay charges merchants a variable “insertion personalised connection with consumers – although
fee” for posting the item (even if the item is not sold in the this benefits all sellers, it is especially helpful for smaller
end) and a “final value fee” based on the price at which businesses and those that do not yet have established
the item is sold. eBay sellers receive a number of “free” relationships with U.S. consumers.
insertion fees per month depending on the type of seller
account they have, ranging from the free “No Store” Challenges
option that includes 50 insertion fees to the “Anchor
Because of eBay’s history, many consumers equate the
Store” option that includes 10,000 insertion fees for
eBay marketplace as a destination for used or
fixed-price sales (i.e., not for auction products).
second-hand goods, even though 81% of products listed
Opportunities on eBay are brand new.10
eBay gives merchants greater flexibility and control, 4.1.3
allowing them to set their own policies regarding shipping, Channel profile: Walmart marketplace
returns, and charges. The platform also offers a simpler
backend for sellers to navigate as they post, track, and Walmart was founded in 1962 as a brick-and-mortar
sell goods. retailer in the U.S. and is now the world’s largest retail
chain, with both a physical and digital presence.
Consumers often turn to eBay for more unique brands
(e.g., handcrafted items), while other major Internet Walmart.com’s online store was originally an extension of
retailers are known for common brands or commoditized its brick-and-mortar outlets and product offering.
items. In general, eBay is considered more However, in 2009 Walmart launched a marketplace
accommodating for smaller sellers, partly due to the feature that brought wider brand variety to its online
number of insertion fees that are included even in a free platform: Walmart stores in the United States carry
account. Smaller brands are better able to differentiate approximately 125,000 products, while the website
from major brands on eBay because large brands have carries over 11 million items and has plans to continue
not flocked to the eBay marketplace the way they have expanding product variety. The third-party merchants on
to Walmart and Amazon, so small brands can stand out Walmart’s marketplace accounted for over US$1.6 billion
more easily. eBay also allows sellers to create in sales in 2017.
10
eBay, “Why eBay?”. http://pages.ebay.com/why-ebay/
Return to Table of Contents E-commerce Guide to the United States | 20Opportunities marketplace that rewards buyers with discounts
depending on how many items are in their order. This
Walmart is attempting to make shopping a seamless unique method has been particularly attractive for
experience for customers. For example, the company has retailers that are seeking a second sales channel and
established partnerships to provide local delivery from willing to offer discounts to bulk buyers.
Walmart stores and to use the stores as a pickup
location for items sold online. This means that brands Jet.com’s primary demographic differs from that of
selling products via Walmart.com (whether as part of Walmart.com. Jet’s shoppers are typically higher-end,
Walmart’s own inventory or through the Walmart younger, and more urban – which is similar to the
marketplace) can now offer customers the option of demographic that most frequently uses Internet retailing
delivering goods to a location other than their home or in general. Walmart is conscious of this distinction and is
office. Additionally, Walmart’s strategy of multi-channel looking to add more high-end brands that resonate with
integration has included adding marketing material in its this segment of the population.
many brick-and-mortar stores that directs consumers to
its online portal, providing another potential lead to Even as Jet.com aims to cater to a higher-end clientele,
your products. the website still looks to shave as much cost as possible.
For example, discounts are offered to consumers who
Challenges are willing to waive the right to return an item or who use
debit cards instead of credit cards.
Consumer perception of Walmart.com is based largely on
the history of its brick-and-mortar retail chain, which has For sellers, one of the key benefits of Jet.com is that
focused on high volumes and low prices. This focus on there are no monthly fees that sellers must pay, only
value means that many consumers do not turn to monthly commissions.
Walmart’s online portal when they are seeking newly
introduced or high-value products. Moreover, many Perhaps the biggest disadvantage for sellers is that Jet.
consumers in the U.S. associate Walmart with “cheap” com’s backend management systems are not as user
(i.e., inexpensive and low-quality) products, though friendly as those offered by Amazon or eBay. For
well-established brands with a reputation for quality can example, sellers are forced to integrate with Jet.com’s
avoid this “connection by association” to some extent. application programming interface (API). This can inhibit
less tech-savvy companies from integrating their services,
4.1.4 though companies determined to sell on Jet.com can
Channel profile: Jet.com hire external technology firms to build this integration.
Another downside to the platform is that is that it takes
Jet.com is an e-commerce website that was launched in several weeks for sellers to receive approval to join the
2014 and acquired by Walmart in 2016. Jet.com still marketplace.
operates as a separate website and has a unique
Return to Table of Contents E-commerce Guide to the United States | 214.1.5 significant share of business conducted by independent
Channel profile: Rakuten online stores. In 2017 small retailers (those accounting for
less than 0.1% of total Internet sales each)
Rakuten is the largest Internet retailer in Japan and represented over 12% of Internet retail sales in the
entered the U.S. market by purchasing Buy.com in 2010. United States. Some of this came from brands selling on
Since rebranding Buy.com into Rakuten.com, the company their own websites as well as through online retailers.
has replicated the strategy it used to differentiate itself in
the crowded Japanese market: The Rakuten Super Points There are two ways for your company to create its own
system is a loyalty system that offers rewards points that online store: using an off-the-shelf e-commerce platform
can later be redeemed for future purchases on Rakuten. or creating one from scratch. There are several providers
The system has been a favourite in Japan and is similar (e.g., Shopify) that specialise in creating e-commerce
to many rewards programs offered by credit cards the websites and can enable backend functionality such as
United States. Sales by merchants on Rakuten’s U.S. order placement and inventory management. These
marketplace totalled US$824 million in 2017. providers typically charge a monthly or annual fee and
take care of hosting your website and domain name.
Sellers that join Rakuten’s marketplace are charged an Instead of using a pre-made e-commerce option, you can
account fee of US$33 per month plus percentage-based make your own. There are open-source products such as
sales commissions as well as a flat US$0.99 per item. OpenCart that can help you start from scratch, but either
Additionally, merchants that want to sell in the U.S. must way you will need technical expertise to program the
have a checking account, credit card, customer service website, add e-commerce functionality, and ensure the
phone number, and address all in the United States. platform is secure. You will also have to manage service
providers that offer website and domain hosting.
Although Rakuten is significantly smaller than Amazon or
eBay in the United States, the company seeks to attract As it will be consumers’ introduction to your brand, it is
sellers by offering greater support and customisation. critical that your website loads quickly and be easy to
Sellers that join Rakuten are assigned an account navigate. This is true if you do not have your own online
manager and have the ability to build mailing lists by store but is especially true if your website has an
drawing from customers who have previously purchased e-commerce component: Online shoppers dislike having
from your company. Sellers can also customize their to wait for product photos to load and will leave your site
online storefronts and create unique URLs to distinguish altogether if they struggle to find what they are looking
themselves within the broader Rakuten marketplace. for. In addition, if you rely mostly or entirely on your
independent online store, you will need to invest
4.1.6 heavily in marketing to generate leads because you
Channel profile: Independent websites will not benefit from appearing in product searches on
popular online marketplaces. Your marketing tactics may
While most of e-commerce in the United States occurs include search engine optimisation, paid advertising, and
via large retailers and marketplaces, there is still a content creation across your website and others.
Return to Table of Contents E-commerce Guide to the United States | 224.2
Preparing for business
After selecting which online sales channel(s) to use, the next step your business must
tackle is to prepare all necessary logistics to begin selling your product, something
that will be an ongoing operational activity, although its scope may change as your
sales volume in the U.S. increases.
What this entails will depend on the sales channel(s) you a website should load in approximately two seconds or
have selected but might include loading items into your less, as anything higher than that risks losing customers.
sales channel, arranging payment processes, and There are many providers that can help your company
developing an order fulfilment process. build a website and/or online store that meets consumer
expectations (remember that even if you decide not to
4.2.1 operate an independent online store, you should still
Website and technology have a strong website that represents your brand).
Having a well-designed and executed website is critical
to success on the Internet. The industry standard is that
Return to Table of Contents E-commerce Guide to the United States | 23WordPress, Wix, and Squarespace are three providers Starting with PayPal in the late 1990s, there are now
that allow users to quickly build websites and that offer dozens of online payment options in the United States,
extensions for building online stores. Others, such as including Square, Stripe, and Apple Pay as well as
Shopify and BigCommerce, specialise in making peer-to-peer payment platforms like Venmo. Major
websites and providing services for e-commerce consumer finance companies like Visa and MasterCard
platforms. As previously mentioned, you can also use one have also released online payment platforms, aiming to
of the extremely flexible open-source platforms available decrease consumers’ dependence on cash and capture
for building e-commerce platforms from scratch (e.g., as much of consumer spending as possible.
OpenCart and WooCommerce), though this would
require greater technical expertise. All these providers If you decide to use an online marketplace, then payment
and platforms also offer a wide range of tools that can processing will likely be handled by the marketplace
make it easier to manage or market your business on operator, which will transfer payments from the buyer to
the Internet. your company’s account. In order to protect consumers
from fraud, some operators only complete payment
There are two distinct but related parts of managing an transfers after confirming that the buyers have received
online store: the customer-oriented front-end, for which the products. Certain marketplaces such as Amazon
you can often find off-the-shelf solutions; and the require sellers to have bank accounts, while others allow
backend that customers do not see, where you manage sellers to use platforms like PayPal.
your information and technology (IT) infrastructure. It can
be easy to focus so much on the front-end aspects your If you decide to sell via your own website, your online
customers will see that you neglect the backend payment portal will consist of a payment gateway, a
processes that are critical to your ability to offer payment processor, and a merchant account. You may
customers a smooth purchasing experience. Indeed, the decide to use separate methods or providers for these
backend can be significantly more challenging to components, but many service providers (e.g., BluePay)
develop: Whether it is coordinating marketing content offer complete solutions that integrate all three with both
across multiple platforms or connecting your storefront off-the-shelf and open-source e-commerce platforms.
with real-time inventory data, there are significant hurdles
Payment gateways are akin to digital point-of-sale
in building out a robust online store.
terminals. Your payment gateway will act as an
4.2.2 intermediary, receiving credit and debit card information
entered onto your website and offering customers some
Payment
degree of security regarding the privacy and security of
When online commerce first started in the 1990s, many their information. Gateways are then responsible for
consumers were hesitant to share their payment passing this payment information onto the payment
information over the Internet, even with familiar processor. Typically, payment processing companies
companies. This is still true in many parts of the world, such as PayPal include a gateway as part of their service,
but in the U.S. this consumer hesitation towards online meaning you would have a single provider for both the
payments has decreased significantly. payment gateway and payment processing.
Return to Table of Contents E-commerce Guide to the United States | 24Payment processors are responsible for connecting the
payment gateway with the merchant account (i.e., with
your account) and for passing information back and forth.
Some processors also offer merchant services.
Merchant accounts are financial accounts that are
authorized to accept online payments. These are often
called “merchant IDs” (MIDs) and can be opened with
online payment companies, some large banks, and other
independent organisations.
When selecting service providers for your payment
gateway, payment processing, and merchant account, 4.2.3
the two main factors to consider are the technology the Legal concerns
providers use and how much their service will cost. It is
important to make sure that all three services are Your company is not legally required to incorporate a
integrated with your website’s front-end and backend business in the United States in order to sell via
technology systems to ensure a seamless experience for e-commerce channels in the country. However, certain
customers and keep your business’s operations running marketplaces, vendors, and partners may require that
smoothly. When evaluating cost, be careful to take into you set up a U.S. bank account or incorporate in the U.S.
account all of the fees that the provider will charge and even though it is not a legal requirement. Additionally, if
how they might change as your business grows. you have recently launched your venture and are looking
to expand into the U.S. as a first step, then it may make
When selecting a payment processor in particular, it is sense to seek a partner in the United States and
recommended to use one based in the United States. incorporate with them. If you do choose to incorporate
The U.S. has been slow to adopt foreign payment in the United States, then keep in mind that the process
platforms like Alipay, but there are many U.S. payment is done at the state (not federal) level. Consult with an
platforms have been successful and are well-known attorney about what would be best for your business.
among and trusted by online shoppers. Examples of
payment processors in the United States include PayPal, Regardless of incorporation status, all businesses selling
Stripe, Authorize.net, Amazon Payments, and Braintree. online in the U.S. should be aware of the U.S. anti-spam
law (CAN-SPAM). This federal law makes email “spam”
Lastly, your business should also pay attention to the (unsolicited email) illegal, though it recognises email
currency in which transactions will be charged. There marketing as a legitimate tactic used by businesses. To
would be an exchange rate risk if your product prices avoid sending email messages that would be considered
were to be fixed in U.S. dollars while the cost of goods spam under this law, businesses must include instructions
sold and cost of shipping were set in Canadian dollars. on how to unsubscribe to emails in every message they
send, clearly label email messages as advertising, and
avoid misleading subject lines.
Return to Table of Contents E-commerce Guide to the United States | 254.2.4 If your company handles order fulfilment in-house, you
Supply chain options and your staff are responsible for the entire process from
when a customer places an order to when the product is
Changes in supply chain practices and technology over delivered: keeping track of and restocking inventory,
the past 20 years have enabled the emergence of new organizing customers’ orders, picking the right item(s) from
e-commerce companies by eliminating the need for the shelves when an order comes in, packing the item(s)
upfront investments in logistics. When many Internet appropriately, printing a shipping label, and delivering the
retailers launched in the 1990s, they replicated what they package to Canada Post or another courier. This process
knew: the logistics systems of brick-and-mortar retailers, is particularly complex if your product portfolio covers a
including having company-owned warehouses and wide range of categories and SKUs. However, a smooth
vehicles. These large upfront capital requirements order fulfilment process is critical to competing in online
created impractically high revenue expectations and retail, particularly the ability to ship an order the same
caused many early e-retail ventures to collapse. day the customer makes the purchase.
In contrast, e-commerce companies today use a variety of If your company begins selling enough volume, it may
logistics systems, depending on what works best for their become impractical to continue fulfilling orders in-house.
business. For example, many small and medium-sized In this case, a 3PL provider would be able to manage all
businesses (SMBs) manage their own packing and ship or part of your logistics and inventory process, sometimes
primarily through Canada Post, while many large even integrating with your purchasing system to automate
companies are underpinned by third-party logistics the full process. Some 3PL companies specialise in
companies (3PL). Even some of the largest and oldest providing services for specific industries and may be a
companies today use third parties instead of owning their particularly ideal fit for your company.
own warehouses and/or trucks the way they would
have in the past. The last major decision related to supply chain that you
need to make is whether to keep inventory in the United
The dominant method for shipping e-commerce goods States or Canada. Shipping goods in bulk to a warehouse
The ability to avoid in the United States will likely require a freight forwarder
within Canada is Canada Post: Approximately 70% of
infrastructure costs has given
goods sold via the Internet in Canada are shipped by and customs broker. In addition, although it may expose
companies of all sizes access to
Canada Post. Additionally, for a small or medium sized your business to tax liabilities, warehousing in the
consumers around the United
States and worldwide. business (SMB) it is likely that most orders are fulfilled United States enables you to handle returns in the same
in-house rather than through a 3PL company. At sales country. Warehousing in Canada requires you to manage
volumes where it is practical and cost-effective to have cross-border returns, which could increase expenses and
in-house order fulfilment, Canada Post will likely offer the complicate the process for your U.S. customers.
best shipping rates because many 3PL companies are
only cost competitive when there are high
shipping volumes.
Return to Table of Contents E-commerce Guide to the United States | 264.2.5 in the United States, it may be able to receive returns and
Customs processes restock items for you. If returned items need to be sent
back to Canada, it can be a complicated process.
Importing into the United States is relatively easy due to
the North American Free Trade Agreement (NAFTA). Whether returned products will go to a warehouse in the
Canadian businesses have two options: informal entry U.S. or back to Canada, you first need to decide who will
into the U.S. or formal entry. pay for the return shipping and other associated costs:
your company or the customer. Customers in the U.S.
Informal entry requires (a) that the goods be valued have increasingly become accustomed to free returns
under US$2,500 and (b) that the exporter accompany the and this trend is expected to continue. Although
goods or the co-signee pick up the goods at the port of customers do not necessarily have the same expectations
entry. Informal entry also allows for door-to-door or for products coming from outside the United States, it
postal deliveries, making it a potentially enticing option does mean that your products will be competing with any
for goods warehoused in Canada and shipped across similar products that benefit from free return shipping.
the border.
If your company will be paying for return shipping within
Formal entry is required for unaccompanied goods or
the U.S., it can take advantage of services like the United
goods valued over US$2,500 and requires the use of a
States Postal Service (USPS) Print and Deliver Label
customs broker. Customs brokers are responsible for
Service. This USPS service allows a company to order a
staying up to date with customs regulations, preparing
return shipping label to be sent to the customer and then
documentation, and arranging necessary bonds. Customs
charges the company for the label once the package is
brokerage services are often offered by 3PL companies
delivered.
and can be incorporated into their other services.
After deciding whether to use formal or informal entry to If returned products are going to be sent back to
move your products across the border, be sure to Canada, your company (or your 3PL provider) will have
calculate the cost and time involved so that you can pass to prepare return orders for Canadian customs. USPS
costs onto customers if needed as well as set customers’ offers a tool for generating a customs form, which needs
expectations regarding estimated delivery times. to be printed and attached to the package in a separate
envelope. The sender (either your company or the
4.2.6 customer, depending on who will be responsible)
Returns must also write “returns/repairs” on the customs form.
If this is not included on the form, the package will be
The complexity of a return is greatly affected by whether counted as an import and your company will have to pay
the product needs to be shipped across a national any associated duties or taxes upon arrival in Canada.
border. If you work with a 3PL company that warehouses
Return to Table of Contents E-commerce Guide to the United States | 27Key takeaways on entering
the U.S. market
• Identify one or more sales
channels to use
• Create a website to market
your product
• If you have decided to manage
an online store on your website:
o Set up a payment gateway
o Partner with a payment processor
Due to the complexity and cost of returning items cross border, it o Establish a merchant account
may be more cost-effective to refund the cost of the goods and let
the customer keep them. This is a decision your company will have • Obtain inventory of your product
to make after weighing the various issues summarized above. and understand how to:
o Store it
It is also important to note that some online marketplaces may o Pick it
mandate specific return policies. You should confirm whether this o Pack it
is the case before you begin selling on a platform that exposes your o Ship it
business to a costly or otherwise impractical return policy.
Case study: Echo Verde
Echo Verde is an ecologically friendly and organic clothing line based in Vancouver, Canada, that has been in
operation since 2009. The company has historically sold its products wholesale. Echo Verde launched an online
store on its website, echoverde.com, in 2017.
Since launching its online store, Echo Verde has tackled problems ranging from uploading products onto the
website, navigating the payment process in the U.S., and shipping across the border using Canada Post.
Echo Verde has sought to attract consumers by using social media and offering coupons for bloggers to use while
promoting the brand. The company’s website has also attracted customers who had previously purchased Echo
Verde’s products through retailers. In addition, Echo Verde has been able to take advantage of its website to sell
excess supply and recoup sales lost from last year’s line-up while selling at higher margins than would have been
possible if they had been sold through a retailer.
In total, the company has brought in approximately C$10,000 in e-commerce sales since launching its online store.
Return to Table of Contents E-commerce Guide to the United States | 28chapter #5
Understanding the
u.s. market
5.1 Market drivers
5.1.1 Technology
5.1.2 Consumer demand
5.1.3 The competition
5.2 The evolution of digital consumers
5.2.1 Digital consumers and your brand
Return to Table of Contents E-commerce Guide to the United States | 29Understanding the u.s. market
Decisions regarding whether to enter the U.S. e-commerce market as well as how to
market and sell your product in the U.S. should be guided by an in-depth
understanding of the market.
You should analyse what is driving e-commerce in the consumers use smartphones for at least six types of
country, any relevant changes in Internet-enabled activity per day on average,11 and this is likely to increase
technology, and how U.S. consumers are reacting to these in the future. The ability to access content “on demand”
changes. Businesses today, particularly those linked to has increasingly led consumers to have similar
technology, are under intense pressure to stay abreast expectations regarding physical products and the
(ideally ahead) of market trends, adapting as needed. purchasing experience. Retailers in the U.S. have
responded by offering faster and faster delivery times at
Changes in the digital landscape have pushed consumers lower cost, with many (if not most) offering at least one
to demand speed, convenience, and rapid access across free shipping option and some even offering same-day
all aspects of their lives. Smartphones in particular delivery for select items at an additional cost.
perpetuate this demand for immediacy: Global
11
Euromonitor, “Connected Consumers: ‘Can do’ Versus ‘Should do’ Thinking,” December 4, 2017. www.euromonitor.com
Return to Table of Contents E-commerce Guide to the United States | 30You can also read
